Life After (And With) Steel

With recession upon us and its attendant unease, taking stock is an unavoidable activity for people like me in the information business. The exercise is made more intense because the past 30 years in Pittsburgh have been times of high drama that attracted international attention and visitors coming to see for themselves.

They ask about everything from our new emphasis on service employment to what helpful ideas we might have for cities like Detroit dealing with economic contraction.Here is my list of lessons from our recent past:

• The Pittsburgh region has never “gotten over” the collapse of the steel industry nor should we have.
• Managing contraction is not something we Americans are good at, but it is important and the key to turning things around. Change comes but very slowly.
• The region’s economy has seen considerable improvement for the better since the late 1990s and, if we play our cards right, the future seems to offer significant promise.
• It is human nature to want to feel good about things. This often forces leaders to get ahead of the evidence in their pronouncements, but being clear-eyed about negative realities is the first step in playing your cards right. The second is doing something to ameliorate the situation.

Lesson 1

When an industry evolves into a way of life, as metals manufacturing did in northern Appalachia from the 1830s onward, it is not an activity that one merely transfers out of. Nor can it be worked past if one but puts his mind to it. The industry is so pervasive that it touches almost every aspect of public and private activity, and what we are as a people and a region have been formed in ways that can be modified only by decades, if ever. We would waste a lot of time and energy in futile efforts to turn back the clock with misguided projects, as Pittsburgh did in the 1980s, but the industry, reshaped and diminished, will remain an asset to be husbanded, if handled with patience and wisdom.

Tangible evidence of this are the two $1.2 billion investments going forward in U.S. Steel’s Clairton coke operation and Allegheny Technology’s specialty steel operation in Brackenridge. Global economic conditions may influence the pace of these projects with U.S.Steel’s recent decision to put their Clairton work on hold being such an event.

And there is no doubt that the impact on employment from steel operations today is a shadow of what it was when the regional industry started shutting down in 1978. But these projects are significant and show the importance of metals manufacturing here.

Less noted but perhaps as important, Pittsburgh remains a global leader in metals technology and support. The University of Pittsburgh’s Center for Industrial Studies reported last year that 329 regional firms provide the nation’s largest cluster  of steel services (production equipment,  engineering services, parts and supplies, and raw materials). If you look at figure 1 you will see that manufacturing in the Pittsburgh region, while contracting both before and during the recession, has been relatively steady. Steel has much to do with that.

Lesson 2

Between 1979 and 1988, steel employment in what was then a four-county Standard Metropolitan Statistical Area (it is seven counties today) dropped 61 percent, or 56,000 workers. There were another 45,000 manufacturing jobs lost for a total contraction of 44 percent during that time. Thousands of young workers left the region searching for work. This generational but acute diaspora is felt to this day because there has never been an offsetting in-migration from abroad of workers in their 30s and 40s to take on new jobs and raise families.

I do not think we Pittsburghers ever have adequately appreciated the magnitude of those events; I personally contributed to the misunderstanding by what might best be described as a false sense of optimism. This was particularly true in the case of the so-called “Second Renaissance” during the 1980s and early ’90s when six new office towers changed the skyline, light rail replaced the trolleys and a subway was opened connecting to the South Hills. There was a new airport in the works, as well as an interstate extension to Cranberry. Further turning heads was Rand McNally’s Places Rated Almanac designating Pittsburgh as America’s “most livable city” in its first edition in 1985. I remember writing more than a few times about the corporate headquarters city on the move.

Was it a renaissance that was then under way? Not really, as hindsight has shown. Was the general displeasure at negative news merely the product of civic boosterism? Not entirely. Good things were occurring, but the overall picture was mixed: Since 1980, foreign immigration has been the primary engine of U.S. population and economic growth. Without that immigration, “natural population loss” (deaths out numbering births) took hold to stay in Pittsburgh, see figure 2. The region remains the only major city in the nation to experience small but consistent population decline for three decades, going on four, with the high median age of that population being a subject of regular attention.

Lesson 3

The problem, as always, is human nature. We are suckers for anything new and quickly get bored with anything negative. We want to get bad news behind us and in the process often lose proper attention to important detail. Welcome to the latest chapter in Pittsburgh history, where a fundamental reordering is under way with much less fanfare because we have learned our lesson.

One reason for our caution has been the population numbers. Another is the fact that the region has yet to get back jobs in proper numbers. The recession of 2001 nipped a steady employment recovery in the bud. And, if not for the current recession, the region might finally have  set a new record for jobs last year. But “no dice” remains the verdict on the institution of a new era in employment, see figure 3.

That said, the transformation of the region’s economy since the end the 1990s has been solid. This in turn has helped us withstand some significant kicks in the shins. Foremost among them have been the departure of three storied and important corporate leaders. I have in mind CBS’s sale to Viacom and dismemberment of Westinghouse, the US Airways bankruptcy and abandonment of its Pittsburgh hub for Charlotte, and Mellon Bank’s merger with the Bank of New York.

Among many positives during the same period have been the well chronicled public and private investment in higher education and health care, with Pitt’s hospitals and research and Carnegie Mellon’s groundbreaking advances in robotics and artificial intelligence in the forefront. There has been a concurrent major investment in the development of land adjacent to the rivers, particularly in and around the Golden Triangle. In all cases (sports stadiums, a convention center, a subway extension and a casino), applause has been far from universal, at least from those who had no money or reputation at risk.

If the emphasis on superior design and environmental sensitivity that have characterized these developments can be sustained, they should all prove to be positives in the manner of the earlier office towers and subway. Two very recent developments seem to me to have the potential to be even more significant: The reemergence of a Westinghouse spinoff as a global leader in nuclear power plant development, and PNC’s purchase of National City, forming the nation’s fifth largest bank. New size and reach are not something we’ve seen much of in our home-based corporations.

This is a powerful assembly of new assets to build upon if we pay attention to…

The available data clearly indicate that we do not compare favorably on a number of social and civic measures with other regions of the country with which we compete for research dollars, business contracts and cultural excellence. Poverty, environmental damage and dysfunctional local governments are three important examples. None is a matter newly arrived. All are part of our industrial heritage; in many cases, they’ve been around for so long that we stopped noticing.

Figure 4 highlights the consequences of abandoning the core city. Comparable experiences have occurred up and down the three rivers in the towns and small cities where steel manufacturing once held sway. As we tackle those challenges together with our newfound “clear-eyed” realism, there is reason to feel good about things besides our extraordinarily well-named professional football team.